Phases of the Customer Relationship Lifecycle and What They Mean for You

1. Definition: What is the customer relationship lifecycle?
2. Why is the customer relationship lifecycle relevant?
3. What phases does the customer relationship lifecycle have?
4. How to optimize the customer relationship lifecycle?
5. Conclusion

In this article, I show you how a customer relationship lifecycle develops better over the course of a business relationship and how you can use it for your business.

Based on the different phases of the customer relationship lifecycle, you can tailor your marketing measures specifically to the needs of the customers. So you are with the right customers, at the right time, in the right place, with the right content. Sounds good, doesn't it?

Definition: What is the customer relationship lifecycle?

The customer relationship lifecycle is a model of Customer Relationship Management and is also called Customer Lifecycle. The focus is on the customer and his/her relationship with a company. The lifecycle is divided into individual phases, which customers go through in the course of their relationship with a company: Customer Acquisition, Customer Retention, Customer Reclamation.

Bruhn, the father of CRM, defines the customer relationship lifecycle as follows:
⁠„The customer relationship cycle describes ideal typical regularities in the temporal course of a customer relationship, which allow the distinction of individual phases of a customer relationship based on the intensity of the relationship and conclusions for relationship marketing“ (Bruhn, 2016, p. 65).

Why is the customer relationship lifecycle relevant?

Experience shows that this rule of thumb is true in many cases: New customer acquisition is 5 times more expensive than customer retention. It's worth spending more time designing customer retention measures.

The customer lifecycle is a model that helps you understand and optimize your customer relationships over a longer period of time. Instead of focusing on the initial one-time transaction, the focus shifts to the customer perspective. Your goal is for a customer to buy from your company again and again.

The highest marketing costs occur in the period before a customer has even made the first purchase. In many industries, it is even customary for these acquisition costs not to be covered by the first purchase. Only when the customer buys again does the contribution margin exceed the acquisition costs, and the profitability of the customer increases with each subsequent purchase.

So think carefully about what your customer needs from your company at what stage of the lifecycle to feel comfortable and buy again.

What phases does the customer relationship lifecycle have?

The customer lifecycle can be divided into 3 main phases according to Stauss: Customer acquisition, Customer retention and Customer reclamation (Stauss, 2000, p. 15 ff.).
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⁠But how do you recognize which customers are in which phase?
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⁠Behavioral data and sales data can be used to categorize your customers exactly. Manually, this is admittedly a tedious task, which is why there are digital CRM systems like monday sales CRM. No matter which one you choose: The categorization of your customers according to customer relationship lifecycle should be possible for all of them! It all depends on your needs and your budget. There are also great free CRM systems, like SalesforceCRM that are super suitable for beginners.

The acquisition phase describes the emergence of a customer relationship. In the early stage of acquisition, the initiation phase is in focus, in which it is particularly important to gain the attention of the potential customer. We are actually talking about prospects or also leads. Here a future seller-buyer relationship is initiated and leads are generated. Paid media activities on social media platforms and SEA drive the costs in this phase considerably upwards. In order to get attention and keep the advertising costs low, the content must be creative and on point – also creating high-performance content can drain the wallet. Form a sales funnel, enrich your leads with information and develop them into a customer (Lead Nurturing). This phase ends with the first-time purchase. You should ask yourself the following questions in this phase:

• How much does it cost you to move a lead to the first purchase?
• Does the first purchase cover the acquisition costs?
• Does the product help with the customers' problems?

With the purchase, your customers enter the so-called socialization phase. Buyer and seller find each other and the purchased product or service is tested and evaluated. In order to make your customers satisfied and keep them satisfied, make sure to provide content that confirms that the purchase was a good decision. Accompany them with instructions for use, inspiration for using the product, and the possibility to contact the service team. As a provider, you collect as much information as possible about your customers here to get a better understanding of their needs and to persuade them in the future with individualized offers for cross-selling. Make them follow you on all channels, so you can pass on future content to your customers at low cost. Questions your customers might ask about buying from you could be:

• Has my order arrived?
• Did the payment work?
• When and how do I receive my purchase?
• Can I trust the company?
• What do others say about the company?

The growth phase as the first part of the customer retention phase is the part where you really start making money. Ideally, based on the information you have previously collected, you should offer your customers appropriate offers and service contents to drive cross-selling. While you primarily used paid media in the acquisition phase, here you can already contact your customers with your own channels such as social media platforms, newsletters, and the like with only low costs. Position yourself as a professional, thus strengthening trust because the trust, that the customers have gained for a product from you, spills over to your remaining offer, following the motto „everything from one source“.

Quick tip: To earn your customers' trust, put yourself in the position of the customers by actually buying from you and then using the product from the customer's perspective, and ask yourself the following questions:

• Where are you uncertain in the use of the product?
• What can you use the product for? Do you use it often enough?
• Is an exchange easy for customers? (Often the knowledge that you could easily exchange it is enough for a trustful relationship – without ever taking advantage of the exchange.)
• How can I contact the company in case of problems?
• Does the product need to be serviced? If so, how?
• Where do I get any replenishment or spare parts for my product?
• What other questions come to your mind?

Caution: Anyone who has a customer service should also make sure that it is well trained and informed. Nothing is worse for customer loyalty than bad experiences with customer service. On the other hand, customers can also become absolute fans if the service was outstanding good. Thrill your loyal customers and they do the acquisition for you – recommendations are the best remedy against high acquisition costs.

Depending on what you sell, the maturity phase comes sooner or later for your customers. For investment goods apply here: Your customers have almost exhausted your entire range and thus their growth potential. Nevertheless, the customers are still lucrative for you, because the costs for each further purchase have sunk to a minimum. It sounds like the ultimate goal, but here you have to act especially customer-oriented to make sure your customers stay with you and that you do not get them bored. Automate what you can automate. Your customers need consumables for the operation of your product? Then don't let them forget where they can get it best; at best just when they need the material (demand-oriented intervals). Customer clubs can be the right tool here. Does it sound expensive? In fact, there are no limits here, but often a separate newsletter distribution for your VIP customers is already extremely effective. Prefer them and send them exclusive offers, events as early access, tutorials on new trends discounted or for free. This way a small winery, for example, could offer VIP club only events and free shipping. Little things that flatter your customers and are appropriate for your company size. Larger companies could think about a point system and distribute these points for each transaction, recommendation and/or engagement with your channels. These points can then be redeemed for products from your assortment.
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⁠The recovery phase describes a time period in which the customers consider migrating or actually do so. In the danger phase the customers are just thinking about switching to the competition. This can happen if the customers just need a change, the competition offers a better problem solution or if a customer contact with the company has been negative. To counteract these reasons, you must make sure you stay exciting. Ask yourself the following questions:

• How do I confirm the quality of my products or service or my company for the customer?
• Is my product, my service or my company evolving and do I communicate this to my customers?
• What services offer a better customer experience?
• What does the competition do?
• What trends are there currently or what could become a trend?
• What is the quality of the customer service?

Answer these questions precisely and find solutions for them, which you can communicate to your customers before they even consider cancelling. This is exactly what is meant by churn management (Change & Return).

If a churn cannot be prevented, the customers move on to the resolution phase, where actually „cancellation“ is made – if that is possible. A sign could be that the customers unfollow newsletters, social media, etc. and unsubscribe. Therefore, ask directly at the customers why they do that. If the answer is for example that the offer is too expensive, offer discounts if necessary or list what extra performance your company provides compared to the competition. If there was a specific case like a wrong delivery: apologize generously with a voucher or a product on top. 

If the cancellation has been carried out despite many efforts, the abstinence phase starts. Here the customer does not consume any of your products/services anymore. Show the departed customers the benefits he so liked about your product and assure them that you have fixed any defects. For customers who have not completely cut off the company, it can quite often happen that they return after a short time.

How to optimize the customer relationship lifecycle?

There are two ways you can identify optimization potentials in the customer lifecycle. The more concrete and founded variant is certainly the analytical approach. Define Key Performance Indicators (KPIs) for each phase in the lifecycle, show at which stage of the Customer Lifecycle a customer is, define a journey with individual conversion goals and calculate churn and retention rate. Observe these figures over time with the current campaigns and actions in mind to get a feel for it. Start after a few months with implementing new customer retention measures or improving existing ones. Watch your KPIs. Even more concrete insights are provided by A/B tests. Customer surveys help you to discover blind spots in your customer relationship management.

You don't have the resources to create such detailed reports? No problem, because a lot can be optimized intuitively. Put yourself in the position of your customers, go through your Customer Journey and consider the following:

• Where along the Customer Journey you have questions yourself?
• Where are you stuck or are you unsure how to proceed?
• How often are your customer retention measures used?
• What feedback are you getting from your customers?
• How many of your measures lead to a sale?
• What is the distribution of new and regular customers?
• In which way can you simplify things with maximum benefit for the customer?
• What might my customers need to make my product more useful?

⁠Regardless of whether you approach it number-focused or you have to/may leave the prioritization to your gut feeling, question all your measures regularly: What benefit do my customers have from this activity?

Conclusion

The customer relationship lifecycle helps you to cluster your customers and derive their needs from it. From this you can derive automated, individualized communication measures that aim to make the customer relationship as long as possible and to generate a maximum Customer-Life-Time-Value through cross- and up-selling and avoid migration to the competition. Do good for your customers and they will reward you with loyalty!
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⁠⁠On OMR Reviews you can inform yourself about a range of CRM tools that support you in fostering and nurturing your customer relationships. Based on the verified customer reviews, the following tools are particularly popular in our community:

CentralStationCRM

Salesforce Sales Cloud

Hubspot Sales Hub

Pipedrive

TecArt CRM

Zoho CRM

SuperOffice